BoE Cut Bets Mount Ahead of Key Data

Key highlights:

*GBP under pressure ahead of key UK data; August BoE cut priced: Sterling remains vulnerable as traders brace for Friday’s GDP and industrial output data, with markets pricing a 90% chance of an August rate cut by the BoE amid weakening growth signals.

*Rising UK fiscal risks cap Sterling gains despite hawkish talk: Concerns over fiscal sustainability following Chancellor Reeves’ spending shift are weighing on GBP, limiting upside even as the BoE maintains a cautious stance against sticky inflation.

Market summary:

The British Pound remained under pressure on Thursday ahead of a critical batch of UK economic data that could cement expectations for an August rate cut by the Bank of England. Markets are squarely focused on Friday’s GDP, industrial production, and trade balance releases, which are expected to offer fresh clues about the underlying health of the UK economy.

Consensus estimates point to a modest 0.1% rebound in May GDP, following a deeper-than-expected 0.3% contraction in April. However, with business investment sentiment softening and the BoE’s Financial Policy Committee recently warning of rising geopolitical and fiscal vulnerabilities, a downside surprise could reinforce recession concerns and drive the Pound lower.

Sterling’s fragility is also being shaped by shifting monetary dynamics. Traders have priced in a 90% chance of a BoE rate cut at the August meeting, as sticky services inflation collides with signs of weakening demand. The central bank remains data-dependent, but elevated wage growth and volatile energy costs are complicating its path. Meanwhile, a divided Fed and renewed global trade tensions are injecting fresh volatility into GBP crosses, particularly against the JPY and USD.

Safe-haven flows into the Japanese Yen have accelerated following President Trump’s announcement of sweeping new tariffs, including a 50% levy on Brazilian copper and pending duties on EU and Japanese goods set for August 1. Sterling, often viewed as a risk proxy, has struggled to sustain momentum against the Yen, retreating from multi-year highs near 200. In GBP/USD, the pair remains capped below the 1.3630–1.3650 resistance zone, weighed down by macroeconomic uncertainty and rising UK fiscal concerns following Chancellor Rachel Reeves’ spending pledges.

In the near term, the Pound is likely to remain range-bound but vulnerable. Friday’s UK data dump could act as the next directional trigger. Weak prints may solidify BoE cut bets and push GBP lower, while signs of resilience could offer temporary reprieve. Broader moves will continue to hinge on global risk sentiment, central bank guidance, and the evolution of trade policy risks heading into August.

Technical Analysis

GBPUSD, H4

GBP/USD drifts lower, clinging to support near the 1.3550 area after repeated rejections from the 50-period SMA and the 0.5 Fibonacci retracement zone near 1.3600. The pair remains confined within a bearish channel, with downside pressure persisting amid subdued momentum and fading bullish attempts.

Immediate support is seen around 1.3550—the 38.2% Fib retracement level, while resistance aligns with the 50% Fib at 1.3599 and the 100-period SMA. A decisive break above 1.3610 would be needed to negate the near-term bearish bias and pave the way toward 1.3650.

The Relative Strength Index (RSI) holds below the neutral 50 mark, currently around 39, hinting at prevailing bearish momentum. Although not yet oversold, the RSI’s failure to recover signals lingering downside risk. On the other hand, MACD dynamics remain uninspiring. Both the MACD line and signal line hover just below zero with a nearly flat histogram, underscoring the lack of clear directional bias and suggesting momentum is stalling.

Overall, the technical picture leans cautious to bearish. Unless GBP/USD can reclaim the 1.3600–1.3650 resistance zone, the path of least resistance remains to the downside, with a break below 1.3550 exposing 1.3490 and potentially 1.3420 which is the June rising trendline and prior support base.

Resistance Levels: 1.3600, 1.3650
Support Levels:1.3550, 1.3490